Mark Cuban, Occupy Wall Street, and Your Predatory Student Loans

I’m one of those people who tends to love Mark Cuban. I love that he’s outspoken, I love that he takes risks, and I love that he’s a goofball who often acts, like my grandfather might have said, “like he doesn’t know what to do with himself.” In short, Mark Cuban is good for America.

Last week, Cuban posted “soapbox advice” to the Occupy movement. He talks about the evils of Wall Street, the lie that companies act in the best interest of their shareholders and other things you’d expect from a corporate (I’m sorry) maverick. He makes a lot of great points, my favorite of which is his stance on student loans:

3. Limit the Size of Student Loans to $2,000 per year

Crazy ? Maybe, maybe not. What happened to the price of homes when the mortgage loan bubble popped ? They plummeted. If the size of student loans are capped at a low level, you know what will happen to the price of going to a college or university ? It will plummet. Colleges and universities will have to completely rethink what they are, what purpose they serve and who their customers will be. Will some go out of business ? Absolutely. That is real world. Will the quality of education suffer ? Given that TAs will still work for cheap, I doubt it.

Now some might argue that limiting student loans will limit the ability of lower income students to go to better schools. I say nonsense on two fronts. The only thing that allowing students to graduate with 50k , 80k or even more debt does is assure they will stay low income for a long, long time after they graduate ! The 2nd improvement will be that smart students will find the schools that adapt to the new rules and offer the best education they can afford. Just as they do now, but without loading up on debt.

The beauty of capitalism is that people like me will figure out new and better ways to create and operate for profit universities that educate as well or better as today’s state institutions, AND I have no doubt that the state colleges and universities will figure out how to adapt to the new world of limited student loans as well.

Finally, the impact on the overall economy will be ENORMOUS. There is more student loan debt than credit card debt outstanding today. By relieving this burden at graduation, students will be able to participate in the economy

Okay, so we need to think more fully about the real issue of getting more low-income students into the nation’s best schools. I agree that Mark’s not really there on that. But you know what? Schools like Princeton (Princeton!) are starting to give need-based breaks to students at levels never expected, in some cases forgiving the bulk of tuition out the outset. They’re not doing it because the market or the government is making them. They’re doing it because they are progressive, and because they can afford to. I mean seriously, why should I go to a Michigan State, as great as it is, if I can go to a Princeton for (close to) free?

The bigger question: why is no one but Mark Cuban talking about the outlandish cost of government and the outlandish ease with which one can secure outlandish student loan debt as anything other than an academic bubble? That’s exactly what it is. Worse, many, many of the folks who took out those loans banking on the kind of employment degrees from prestigious universities used to guarantee are currently unemployed. Why? Because the economy sucks, for one, and because everyone and their brother has an advanced degree these days. The market is over-saturated with overqualified, over-debted talent. We’re talking about an entire double-bound generation getting screwed on both ends of the equation. Should everyone have known better and not taken out those loans? Maybe. Should all of the people whose homes were foreclosed have known better? Saying yes to one of those questions is saying yes to both.

Let’s go ahead and say yes to both. That doesn’t negate the predatory practices of commercial real estate lending during the housing bubble, and it doesn’t get student loan providers, including, ahem, the FEDERAL GOVERNMENT, off the hook, either. Demonize the bankers till the cows come home, hang effigies of bad mortgage writers in Zaccotti Park, but don’t forget the role that cynical, opportunistic lending to aspiring students (we’re talking about 18-year-olds here, in many cases) who geeked out enough on the American dream to go to college in the first place play. Let’s not forget the indefensible tuition charged by many colleges, either. In some cases, these institutions offer loan forgiveness for people in public service or low-income community-building vocations. As a divinity school student, I spent a lot of time thinking about forgiveness, and it seems to me that we, the double-bound, aren’t the ones who need to be forgiven.

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5 Comments

The cost of a college education is far higher than it should be, more students attend college than probably should, and student loan debt can be crippling. I agree with all of that, and have no good ideas for how to fix it. But it is ludicrous to think that the costs of an education could simply fall the way home prices have; educators have their own fixed costs that can change only gradually.

But what really bothers me is Cuban’s assertion that “people like me will figure out new and better ways to create and operate for profit universities that educate as well or better as today’s state institutions.” Frankly, there are exceptions, but for-profit higher educational institutions have a long, sordid history of providing very poor-quality education to lots of people who do not need it at high costs.

I’m glad you weighed in. I don’t know that Cuban’s right about the for-profit model. You’re very right that, with exceptions, that model hasn’t worked so well. Actually, I like the word “sordid” a great deal here…I think that’s right.

As an academic as as a professor, can you speak to the pressures facing private and public not-for-profit colleges in terms of grade inflation, the pressure to graduate X% of each class, etc?

As far as the market not dropping out on education because of fixed costs, I don’t know. Yes, those costs are fixed, but some of those costs are part of the problem. More to the point, though, Cuban is right that with less loan money available, institutions will have to find ways to cut costs and tuition. A large part of those “too high” prices is the availability of “too high” loans.

Good questions, and though I have only been in the profession for 1.25 years I think I am in a reasonably good position to answer them.

Regarding grade inflation, I have personally never been pressured to engage in it for student retention or other purposes. In fact, this year at Ursinus I have had other new colleagues ask about grading norms and be told explicitly that they should do whatever they feel is appropriate for their classes. There is an implicit pressure that the arms-race nature puts on us: something like “if I give average students a C, then students are effectively punished for taking one of my courses instead of one in which average students get As.” The other factor that I think contributes to grade inflation is simple niceness — giving students the failing grade that they have earned has been one of the more painful parts of this job.

When I was at Mansfield I was our department’s representative at the faculty senate, which handled much of the governance of the university, and so I saw a lot of the difficulties that the institution had, most of which revolved around declining revenue. There was a lot of discussion about improving student retention being the primary solution to this, but it was about things like improving advising and early intervention when students appear to be struggling rather than lowering standards. (But do not take that as an endorsement of the standards that my colleagues set for students; I think I demonstrated that most were capable of much more than they had previously been asked to do.)

I have seen what happens when revenue at a university drops precipitously, because this was happening while I was at Mansfield, through a combination of declining enrollment and a very significant cut in funding from the state government. What could reasonably be considered non-essential staff had already been cut in previous years. While I was there, they completely eliminated the programs in physics and theater, eliminated all but one of the modern languages, eliminated the position I had been temporarily filling and others with the same status, and otherwise shrunk the faculty (for the next year, not immediately). This had the obvious effect on increasing class sizes and decreasing the diversity of courses offered, but I am sure that it negatively impacted the quality of education in other ways as well. Perhaps they could have found a better way to quickly balance the budget, but I can not imagine that it could have been done without some reductions in faculty.

So sure, announce today that by 2015 the maximum annual student loan will be $20,000, by 2020 it will be $15,000, and by 2025 it will be $10,000, and institutions will find a way to make it work. Deciding that in 2012 (or any other year) it will be $2,000 will mean that only two types of institutions survive: those with very large endowments and those that are willing to provide a very low-quality education.

[…] A few years ago, Mark Cuban gave what he called “soapbox advice” to the Occupy Movement by way of a long blog post. In it, he also talked about the idea that college loans had basically become predatory. […]